Family Office & RIA Weekly Roundup | 11.21.24 | Volume 130

Volume 130

11/21/2024 (5 Min. Read)

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?Private Equity Gets Hungry, Spirit Airlines Declares Bankruptcy, and the Corporate Bond Markets Surge in this Week's Edition...

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* Please note that due to the Thanksgiving holiday, we will not be sending a newsletter next week.

Take a Lap Around the Industry

• Robinhood to Buy TradePMR for $300 Million in Wealth Client Push (Bloomberg)
• Private Equity Buyers Snap up Two More US Accounting Firms (Financial Times)
• The Trump Stock Euphoria Starts to Fade (WSJ)
• Fintech Launches AI Solution for Private Credit Industry (Alternative Credit Industry)

Private Equity Eyes Sandwich Supremacy with Jersey Mike’s Acquisition

Blackstone is set to acquire a majority stake in Jersey Mike's Subs for a reported $8 billion, underscoring private equity’s growing appetite for franchised restaurant chains with strong growth potential. Jersey Mike’s, the second-largest U.S. sandwich chain with over 3,000 locations in operation or development, aims to leverage Blackstone’s financial backing to accelerate domestic and international expansion while enhancing its digital and technology capabilities. The deal reflects a broader trend of private equity targeting franchise-led growth opportunities in the dining sector, as seen with recent acquisitions of Subway and Tropical Smoothie Cafe. While the restaurant industry faces challenges, Jersey Mike’s has outperformed its peers in traffic and same-store sales. However, this investment comes at a time of increasing competition, particularly from Subway, which recently unveiled a global redesign. Jersey Mike’s founder and CEO, Peter Cancro, will retain significant equity and leadership, continuing a growth trajectory that began in 1975.

“Blackstone has a long history of successfully propelling the growth of leading franchisors."

Blackstone

Private Funding Pulse Check

• Gazelle Wind Power, a pioneer in offshore wind technology driving the clean energy transition, has raised €11.4 million in a Series A funding round with support from August One
• With backing from PBM Capital, Blue Earth Therapeutics, a leader in developing personalized therapies for various medical conditions, has closed a $76.5M Series A funding round?
• London-based Ooodles, a fintech startup specializing in IT procurement for SMEs, has raised an additional $2.7M in funding, backed by Traditum Family Office
• CPT Capital? has participated in a $8M? Series A funding round for Glint Solar, a Norwegian startup focused on accelerating solar energy adoptions

Source: FINTRX Data

M&A Activity Tracker ??

• Arkansas-based 1828 Capital, managing $1.5B in client assets, has left Wells Fargo to join hybrid RIA startup Ampersand Partners
• The 1828 Capital team is led by advisors Edward Prewitt, Max Mahler, and Mark Gilbert, alongside a support staff that includes client relationship managers and an operations director
• Ampersand Partners, founded last year by former Wells Fargo executives, continues to expand, having recently added another $1.4B ex-Wells Fargo team in August.
• Ampersand CEO David Kowach previously served as president and CEO of Wells Fargo Advisors before leading Wells Fargo Community Bank

(Citywire)

Once a Pioneer, Spirit Airlines Declares Bankruptcy

Spirit Airlines, once a trailblazer in ultra-low-cost travel, has become the largest U.S. passenger airline to declare bankruptcy in over a decade. Known for pioneering the à la carte pricing model that made air travel accessible to cost-conscious flyers, Spirit’s bright yellow planes became synonymous with affordable fares and a no-frills experience. However, the airline's fortunes waned following losses of over $2.2 billion since 2020, driven by rising labor costs, fleet issues, and intense competition from larger carriers. Spirit’s attempt to merge with JetBlue, blocked by antitrust regulators, further constrained its ability to recover. CEO Ted Christie blamed the “rigged game” of airline competition that favors industry giants. While Spirit restructures in bankruptcy, it plans to continue flying and adapt its business model to attract more premium customers, aiming to emerge as a stronger competitor. Analysts speculate on whether Spirit will remain independent or seek new partnerships post-restructuring.

“DOJ was totally appropriate in challenging the elimination of one of two ultralow-cost carriers. Spirit was left holding the bag. But it was their bag—they created it."

Bill Baer (Justice Department)

Source: WSJ

Risk vs. Reward: Lenders Weigh Strategies as Consumer Borrowing Slows?

U.S. lenders are navigating a paradoxical moment in the credit market: high interest rates on loans offer lucrative returns, yet borrowing demand remains subdued. Despite record-high credit card rates, consumer appetite for debt has been restrained, with household debt growing slower than GDP in the third quarter and inflation-adjusted debt levels well below their 2008 peak. Delinquencies, while elevated, are stabilizing, with signs of improvement in the fourth quarter. However, banks face a conundrum as subdued loan demand and potential Fed rate cuts could pressure revenues. To sustain growth, lenders may turn to riskier borrowers, a strategy reminiscent of past mistakes that fueled higher loss rates during the pandemic recovery. While current economic stability has mitigated risk, future downturns marked by significant job losses could pose severe challenges. Balancing profitability and prudence, banks must tread carefully to avoid jeopardizing long-term stability.

“Lenders are open for business. But there might not be a ton of borrowers walking through the door. That can be a formula for trouble."

Telis Demos (WSJ)

Bond ETFs and Portfolio Trades Fuel Fixed-Income Market Growth?

Portfolio trading in the US corporate bond market has surged, revolutionizing how investors access fixed-income assets. A new report by Barclays reveals that portfolio trades—baskets of bonds bought or sold in a single transaction—now occur every seven minutes, with 2024’s trading volume projected to hit $1.2 trillion, double last year’s total. This method, previously rare due to the unique nature of individual bonds, is now enabled by advances in pricing algorithms and the rise of electronic trading. Portfolio trading's integration with bond ETFs has created a "virtuous cycle of liquidity," driving demand for underlying bonds and enabling systematic credit strategies. Notably, the approach is reshaping market dynamics by improving liquidity for less-traded bonds, reducing the percentage of non-traded investment-grade corporate bonds to near zero. As portfolio trading becomes integral to fixed-income markets, its rapid adoption signals a transformative shift in credit market accessibility and efficiency.

“ETFs, systematic credit, and portfolio trading will likely create a virtuous cycle of liquidity."

Barclays